Subject Matter Jurisdiction

Subject Matter Jurisdiction

Plaintiffs can almost always file in an appropriate state court; except:
admiralty and maritime cases
bankruptcy cases
patent, plant variety protection, copyright/trademark
antitrust
securities
Why? All of these have a certain national significance that requires a certain uniformity of deciding
When can they file in federal courts if Congress chooses to extend federal jurisdiction to them?
arising under the Constitution, the Laws of the US, and Treaties”
“between citizens of different states”
Congress believes that these implicate national concern, so parties should have the right to a federal judge
Concurrent jurisdiction: if either a fed or state court can hear a particular case
Exclusive jurisdiction: if only a fed court can hear a case

Diversity Jurisdiction

Article III, Section 2 permits Congress to vest federal courts with jurisdiction to hear cases between “citizens of different states.” Congress did so in 28 U.S.C. §1332(a)(1).
Goal to eliminate bias against out of state D
To be a “citizen”:
Must be a citizen of the US
Must be domiciled in that particular state (a person can only be domiciled in one state)
Domicile:
Determined at date of filing
animo manendi: intention of remaining
change of residence +
intent to remain indefinitely (no definite plans to leave)
Tests that ARENT used
change of residence + intent to remain permanently
change of residence + intent not to return to original state of residence
Gordon v. Steele
Gordon files in Fed/Western District of Penn
D moves to dismiss on grounds of DJ; say that she is not diverse, and a resident of Penn
Court finds that she had no intention of returning to Penn
domicile test: residence + the intent to remain “indefinitely”

Complete diversity: Each P must be from a different state than each D; co-Ps and co-Ds can be from the same state

Vt + Mass vs. NH + Maine

Minimal diversity: When one of the Ps or Ds are from the same state

Vt. + Mass vs. NH + Mass

**Although Article III, Section 2 and Section 1332(a)(1) use the same language: “citizens of different states,” the Supreme Court has held that Article III permits minimal diversity, but that Section 1332 requires complete diversity. The latter is the famous Strawbridge rule.

**Mas v. Perry

Are Mr. Mas and Mr. Perry diverse? Why? Yes. Mr. Mas is domiciled in France, and Mr. Perry is in LA
Are Ms. Mas and Mr. Perry diverse? Why? Yes. Ms. Mas was domiciled in Miss. and Perry in LA
Married in Miss with Judy’s family, then return to teaching at LSU
Move to Park Ridge, Ill.
They filed in LA then moved to Ill
Jury finds in favor of Mass, but Perry appeals and files motion to dismiss based on DJ (a party or court can raise an issue of Subject Matter Jurisdiction at ANY time)
Court uses same test, but rules differently than in Gordon
Ms. Mas is considered a domiciliary of Miss when she is a student in LA

Citizenship of corporations

Some chose to incorporate in a different state than their new business
Delaware: favorable corp. laws
this is a concern to Congress: meant that more cases would be filed in fed. ct.
1928, corp. citizenship for DJ
can be citizen in two states (where it is incorporated and where is its Principal Place of Business (PPB) (1332a and c)
Where is PPB? Harder; “nerve center” test (where are the offices that control and coordinate the corp’s activities?
Hertz v. Friend
Friends filed a state claim for violation of wage and hour law
Hertz moves to get it “removed” (removal: in general permits defendant, and only them, to file notice with state ct. in which D says there is fed jurisdiction in this case; case will be removed to US district court in the geographic proximity of the trial court); corps prefer to have it in fed ct. usually
Ps argue that Hertz is citizen of Cali; file for a “remand”; Hertz says no, we’re in NJ (incorporated in Delaware)
Judge in San Fran uses the “business activity” test; find that the amt of business found in Cali was significantly more than in any other state
what activities are included? and how are they weighted? at war with administrative simplicity
Supreme ct. reversed and said that they were actually a citizen of NJ
s/b determined by “nerve center” test, usually main headquarters, is often a single place
say it’s consistent with the language of the statute
simplicity of the test; more consistent
Entity citizenship:
unincorporated associations and partnerships are treated diff. they are considered to be citizens of every state in which their members (or partners) are domiciled
AARP, law firm, labor union
LLC, PLLC, LLP? They share characteristics of both partnerships and corporations; inquiry is governed by how the entity is treated under state law (is it more like a citizen, or more like a partnership, etc)

Amount in Controversy

**This rule does not apply to federal question cases.
The party seeking federal jurisdiction must show that his claim was made in good faith and that it is possible the amount in controversy is over $75,000. The party is not required to prove the actual value of the amount in controversy.
The party challenging the jurisdiction will only prevail if he shows with “legal certainty” that the claim will be adjudicated for less than $75,000

St. Paul Mercury: Plaintiff’s good faith allegations control unless it is clear to a legal certainty that the p cannot recover more than the amount in controversy requirement
***Diefenthal v. CAB

The jurisdiction may not be challenged if the actual recovery turns out to be less than $75,000
Aggregation
One plaintiff may aggregate several claims against a single defendant to reach the $75,000 minimum
One plaintiff may not aggregate several claims against several defendants nor may he join claims against other defendants when he has aggregated several claims against one defendant to reach the minimum
Multiple plaintiffs will qualify for federal jurisdiction when at least one plaintiffs claim is valued at $75,000
Jurisdiction will not be allowed when several plaintiffs’ claims total $75,000 but no single claim is $75,000. Exception: Two or more plaintiffs enforcing the same right or interest that they share or own
The same rules apply for class action suits
A counterclaim may satisfy the $75,000 requirement.

Federal Question Jurisdiction

Article 3, secton 2:
The judicial power shall extend to all cases arising under this constitution, the laws of the US, and Treaties made…
28 U.S.C. Section 1331: Federal Question Jurisdiction
The district courts shall have original jurisdiction of all civil actions arising under the constitution, laws, or treaties of the US
The federal question must be part of the well-pleaded complaint. Mottley
The complaint must raise a central question of federal law. Grable/Gunn

Well-pleaded complaint

In Osborn v. Bank of the United States, the Supreme Court held that Art III only requires that the federal question only potentially form an ingredient of the claim or defense of the case.
This formulation would allow the federal courts to hear cases which never, in fact, raised a federal issue. This might not be seen as a wise use of federal judicial resources
One might reasonably expect Congress, then, to narrow the scope of federal question jurisdiction by statute, but it used the same language in Section 1331
So where can you find fed issue?
Federal issue cannot reside only in the defendant’s defense or answer
Nor can it even reside in the plaintiff’s complaint if it is there only to anticipate a defense
One way to present the question is to ask yourself: “What allegations would the plaintiff have to plead and prove in order to win if the defendant said absolutely nothing?”

Mottley:

Got free passes for life (35 ys), but then federal statute prohibited free passes
claim was for breach of contract, started in fed court (no diversity jurisdiction)
state law claim
Mottley’s lawyer did more than just say breach of K;
“The railroad will argue”
the railroad refused to honor the passes because of a 1906 fed law
“if the railroad arruges that, we will argue”
the 1906 federal statute was not intended to apply retroactively to previously awarded passes
Or, alternatively:
the 1906 fed statute is unconstitutional because it takes our property without just compensation
Therefore, we pray for specific performance of the contract
Supreme court said that fed didn’t have jurisdiction (raised issue by themselves; was never an issue before)
Ps complaint referred to federal law, but it did not RELY on federal law to win
Federal law was not an element of their claim (but NONE are federal law issues)
Ironic that the only disputed issues are federal issues

Centrality

99% of these cases are very easy because they follow a simple rule created by Justice Holmes in American Well Works v. Layne & Bowler (1916): a case “arises under federal law when federal law creates the cause of action asserted”:
Employee sues employer under the federal ERISA law which governs things like pension benefits.
Environmental group sues company under federal clean water laws.
Disabled tenant sues landlord under federal Americans with Disabilities Act or Fair Housing Act statutes.
Company sues rival under federal patent law.
Man sues police department under 42 USC 1983 for federal civil rights violations

Minton/Gunn:

Patent case: Minton v. NASD et al = exclusive federal jurisdiction
GRABLE TEST: federal question if:

federal issue is necessarily raised
federal issue is actually disputed
federal issue is substantial
federal issue is capable of resolution in federal court without disrupting the federal state balance approved by congress
Nature of claim: state quiet title; Grable is suing Derue saying that you didn’t get the land validly; deals with if the service of the notice was proper
Facts:
Grable owes fed taxes and doesn’t pay
U.S. seizes its property and provides notice of seizure and right to redeem by certified mail, rather than personal service
grable does not respond and US sells property to Darue
Five years, Grable files state law “quiet title” action against Darue, arguing that the seizure was unlawful because service violated the IRS Code
26 USC 6335 (a): as soon as practicable after seizure of property, notice in writing shall be given by the secretary to the owner of the property
Is the federal issue part of the well-pleaded complaint? YES; the only argument they have is the federal statute of terms of service
Gunn: no fed question jurisdiction because it was not substantial and it disrupted the fed state balance
Understand why the test was not satisfied in Gunn.
Was it raised? YES!
Was it disputed? YES!
Is it substantial? NO; not a big deal; state court judges adhere closely to SCOTUS decisions; it is fact-bound, not interpretation-bound
Disruption of fed state balance? if a lawyer screws up any case dealing with federal issues, then they could go to fed ct., so YES

Removal

procedure that may be employed by Ds to send cases filed by P in state court, to fed court
The P is the “master of the complaint”, but D can veto
Why allow? Puts the P and D on equal footing; each have equal access to a federal forum
P or D could try to destroy diversity: not “collusively removed”
Can P prevent removal?
yes drop fed claims, include non-diverse party
Keys to understand removal are that:
Removal under Section 1441 does not expand federal jurisdiction. A defendant can NEVER remove to federal court a case filed in state court over which the federal court would not have had subject matter jurisdiction had the plaintiff chosen to file in federal court in the first instance.
It is not true that a defendant can ALWAYS remove to federal court a state court case over which the federal court would have had subject matter jurisdiction had the plaintiff chosen to file in federal court in the first instance.
Removal basics:
when the P file in state court D may remove the case to fed if the fed ct. would have had juris if the P filed there and
Avitts:
originally filed in Texas State Court
complain referred to some federal law (very vague reference)
Ds (Amoco) removed to federal court; file with the district court within 30 days of receiving service of complaint
They also requested P to file a clearer complaint
IF P amends complaint, can you remove?
If case does gets removed, but Avitts doesn’t mean that there is fed question, then he should remand; Avitts amends the complaint that gets rid of fed claim (w/o remand)
P wins preliminary injunction
Amoco moves for remand saying there is no federal question! Why? because he loves the fed judge that is giving him what he wants
P opposes remand saying that he pointed out CERCLA and OPA vaguely
says maybe that it doesn’t ARISE UNDER, but the result depends on an imbedded fed issue
Court denies remand
Amoco appeals preliminary relief: under 1292(a)(1)-Note 5
Fifth Circuit vacates relief and remands to state court for lack of SJ
**if court grants remand, then they can make D pay attny. fees
Jaffray
originally filed in Fed court for diversity juris (del/minn v. Wis/Wis
Jaffray filed for a restraining order to bring client files back
they dismiss the case themselves and refile in state court. Why? because fed court didn’t grant restraining order
state court grants him the restraining order in just a few minutes; has to pay a bond; Why? as insurance in case temp restraining order was not issued properly
Before bond gets paid (and tro wasn’t in effect yet), they file a notice of removal on the same day with the federal court
P moves for remand and fees because of the forum defendant rule (1441 (b)(2); still upset because he really wants the tro (june 27)
didn’t grant the motion until August 8
has to start over in state court

PERSONAL JURISDICTION

Sources of law for PJ:
Due Process clause
State long arm provisions
Assertion of PJ
in personam: over the D personally
creates a personal obligation or debt to pay the winning P precisely the amount the court awarded
sometimes D is rendered “judgment proof” if they can’t pay
if can pay, but doesn’t, you can get a writ of attachment for property
cannot get juris over the property; this juris is unnecessary because we already have in personam juris
in rem or quasi in rem: over the D’s property
attachment must happen at outset of litigation
in Pennoyer, service had to occur within the boundaries of the forum state
traditional bases of juris:
consent
presence
residence/domicile
Two pressures on Pennoyer:
motor vehicles (mobility of parties)
interstate commerce
now: internet issues and the expanding concept of physical space
Fixes:
expansion of consent:
Hess v. Pawloski: if you are driving in any state, you give implied consent to be tried in their courts under their standards
International Shoe
State of WA wanted to sue a DE corporation with PPB in Missouri for unpaid contributions to the state unemployment compensation fund
Shoe’s only contacts in WA were the 11-13 salespeople who rented rooms and sales areas in WA… customer base here
no manufacturing, no office, shipping the exact quantity to customer (they only have one shoe on display)
quasi in rem (Pennoyer) is not possible because Shoe has no property in WA
Shoe also says they are not present in WA
New rule:
Shoe should be subject to Wa laws (in personam jurisdiction)
Minimum contacts test: “with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice’”
why? they are taking advantage of WA laws (they can sue in courts of Wa, can drive on highways, use their customers)
Two ways to establish sufficient contacts
Specific juris: the cause of action arose out of the D’s contact with the forum state, OR
General juris: The cause of action did not arise out of the D’s contact with the state, but the D’s contacts with the forum are so continuous and systematic that it would be reasonable for there to be personal juris over the D in the forum state
Service in Shoe
Service does not have to occur in the forum state
“nor can we say that the mailing of the notice of suit to Shoe by registered mail at its home office was not reasonably calculated to apprise appellant of the suit”

Specific Jurisdiction

Requirements:
D has minimum contacts with the forum
claim arose out of these contacts, AND
Personal jurisdiction is consistent with notions of fair play and substantial justice
McGee v. International Life Insurance Company
Upheld jurisdiction over Texas Insurance company in California even though they had one client in the state
state court jurisdiction satisfies due process when it is based on a contract with substantial connection with state
Court noted two things:
The Texas company reached in to California and solicited the person
California has an interest in adjudicating claims that affects its residents. (states interests)
would be different if P moved to a different state and Insurance didn’t “reach in” to follow him
Other factors:
burden on D
interest of P
interest of forum state
interest on efficient resolution
possible impact on substantative law
from Hanson v. Denckla: “It is essential in each case that there be some act by which the D PURPOSEFULLY AVAILED itself of the privilege of conducting activities within the forum state, those invoking the benefits and protections of its laws”—that it does something affirmative itself to participate in the business relationships of the state
contacts are necessary, but NOT sufficient
World Wide Volkswagen v. Woodson
Ps bought a car in NY from retail dealer Seaway. Ps were driving their car during their move from their former home in NY to their new home in AZ, and got in a serious accident in OK. They attempted to sue Seaway (NY) and the regional distributer (only did business in NY, NJ, and CT) in OK
Found no jurisdiction in Oklahoma because the D’s had not reached in. The P’s drove the car there
not enough that is FOS for product to end up in forum state; test: is it FOS that they would be sued there
protects D against the burdens of litigating in a distant or inconvenient forum
if the 5 factors point towards juris, then why is case failing?
two part test requires minimum contacts AND fair play
minimum contacts wasn’t met here—fair play notions do not push us above the line
fair play notions can only bring it below the line (requires minimum contacts)
don’t seem to “avail themselves”
unilateral activities of the third party are not sufficient for the “contact”—think of McGee moving to another state

Gray v. American Radiator—gets to stream of commerce
“The forum state does not exceed its powers under the due process clause if it asserts personal juris over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state”
Do they anticipate being called for suit in another state (like Ill.)
Burger King v. Rudzewicz
D and P entered into a contract w/ BK to open a franchise in Michigan, they don’t make enough money, BK cancels contract, but they continue the store
Sues for breach of contract and trademark violation; sues in Florida federal court
“These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. On the other hand, where a D who purposefully has directed his activities at forum residents seeks to defeat juris, he must present a compelling case that the presence of some other considerations would render juris”
D need not ever physically enter the forum state; in contracts cases, relevant minimum contacts are:
prior negotiations
contemplated future dealings
terms of the contract (governed by FL law; forum selection clause)
parties actual course of dealings

Libel